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  • Writer's pictureHarpreet Malhi

Year-End Tax Planning for Corporations: Tips and Strategies for 2023 Optimization

Updated: Feb 7



December 31, 2023 is fast approaching… see below for a list of tax planning considerations. Please contact us for further details or to discuss whether these may apply to your tax situation.


SOME 2023 YEAR-END TAX PLANNING TIPS INCLUDE:


  1. If you own a business or rental property, consider making a capital asset purchase by the end of the year. Many capital assets purchased and made available for use in 2023 will be eligible for a 100% CCA write-off under the immediate expensing rules. Some zero-emission electric vehicles purchased by businesses may be eligible for a 100% write-off (limited in some cases to the first $61,000). Alternatively, zero-emission vehicles purchased in 2023 may be eligible for a federal incentive rebate of up to $5,000.

  2. NEW! The alternative minimum tax (AMT) regime is proposed to change for 2024. Individuals may find themselves subject to a larger AMT liability in 2024 and onwards if they have high earnings (above approximately $173,000) and experience certain events with tax-advantaged benefits, such as large capital gains (including the use of the lifetime capital gains deduction) and significant charitable donations. In some cases, triggering transactions in 2023 may be advantageous. 

  3. Corporate earnings in excess of personal requirements could be left in the company to obtain a tax deferral (the personal tax is paid when cash is withdrawn from the company). The effect on the qualified small business corporation status should be reviewed before selling the shares where large amounts of capital have accumulated. In addition, changes that may limit access to the small business deduction where significant corporate passive investment income is earned should be reviewed.

  4. If dividends are paid out of a struggling business with a tax debt that cannot be paid, the recipient could be held liable for a portion of the corporation’s tax debt, not exceeding the value of the dividend.

  5. Consider paying taxable dividends to obtain a refund from the refundable dividend tax on hand account in the corporation. The refund amount may be restricted if eligible dividends are paid. Eligible dividends are subject to lower personal tax rates.

  6. Access to the corporate federal small business deduction is reduced where more than $50,000 of passive income is earned in the corporation. Consider whether it is appropriate to remove passive income-generating assets from the corporation and whether a shift in the types of passive assets held is appropriate. In some provinces, it may actually be beneficial to have access to the federal small business deduction reduced. As many variables affect these decisions, consultation with a professional advisor is suggested.

  7. If you provide services to a small number of clients through a corporation (that would otherwise be considered your employer), CRA could classify the business as a personal services business. There are significant negative tax implications of such a classification. Consider discussing risk and exposure minimization strategies (such as paying a salary to the incorporated worker) with a professional advisor in such scenarios.

  8. NEW! Effective January 1, 2023, all gains arising from the disposition of residential property (including assignment sales) owned for less than 365 days are deemed to be business income (taxed at the full rate and not eligible for the principal residence deduction) unless a particular exception is met. Consider holding such properties for more than 365 days to avoid the application of these rules. Gains on such dispositions later than 365 days may still be classified as business income under the traditional rules, depending on the nature of the transaction.


Malhi Accounting Professional Corporation proudly provides tax and accounting services to businesses and individuals across Canada. Whether you require assistance with an audit or guidance in preparing for the tax season, Malhi Accounting offers reliable and transparent assistance every step of the way. A sincere desire to set clients up for success paired with over a decade of experience ensures progressive and reliable consulting services for individuals and businesses alike. To access the advice only a Chartered Professional Accountant can provide, contact Malhi Accounting today at harpreet@malhiaccounting.com or +1-416-407-5436, or visit malhiaccounting.com/contact


The preceding information is for educational purposes only. As it is impossible to include all situations, circumstances and exceptions in a newsletter such as this, a further review should be done by a qualified professional. No individual or organization involved in either the preparation or distribution of this letter accepts any contractual, tortious, or any other form of liability for its contents.

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